»Expand on 1st 3, but please the audience«

I loved M3 - as part of the saga etc. If you read most of the reviews at RottenTomatoes you'd think everyone had just seen Pluto Nash or something. Whittling the complaints down we see the following patterns

a) M1's concept blew everyone's mind (i.e. the world doesn't really exist. "Wow this movie's idea is really fresh". To quote the architect "Please!...") M2+M3 didn't expand in that direction

b) M1's story level was great. M2+M3 just enhanced bullet-time etc to the point of ridiculousness (Personally I loved it, but people are uncomfortable with too much unbelievability i.e. you can enhance your avatar to kung-fu. But flying?(without realising the japanese tie-in of enlightenment) too much)

c) Most people (read Ebert's review "why did they need to fight the squids in enhanced machines and not just be man vs machine?" - maybe because that was the whole point?) just didn't get it

So here's some ideas for M4 - Matrix - giving the audience more of what they want, but keeping the integrity of what's been done :

Neo wakes up in a new reality (i.e. "heaven"). The 4th reality. And sees only the "dead" characters. Since everyone died real deaths, they are there - but he has an attachment to the other 2 realities (in keeping with his messianic story). The "real world", the matrix etc. Smith, on the other hand - is in hell. Neo has to travel there and confront him.
This gives TONS of opportunities to incorporate many theologies about the afterlife, explain lots of things about the rest of the matrix (how Neo managed to change reality) and give many interesting theories on paranormal occurences in the real world - people on the path to heaven/afterlife etc. Plenty of cool visual opportunities too

Any thoughts/opinions?

I like your idea of Neo waking up amongst everyone who has died, but I think bringing heaven and hell into the mix would make the movie too religiously heavy. Besides, the Matrix trilogy, although it only eludes to many religious ideologies, seems to pull the most from Buddhism where attaining enlightenment is the ultimate goal. Thus, a story that would flow from this premises might pose the questions what is heaven, could heaven be enlightenment and vise versa, etc.